Metaverse funds lead the latest ETF flurry

Crowded trades can be a sore spot in a sell-off, and that’s something we’ve seen with many themed exchange-traded funds (ETFs) in the last year or so. Funds invested in potentially hyped areas, from cloud computing to e-commerce, suffered some sizable losses on paper over a 12-month period, while demand for thematic portfolios generally dipped a bit. As some of the foam dissipates and investors become more cautious, we might have expected to see fewer launches of thematic funds that seemed frequent until recently.

And yet, there was no such luck for investors hoping for a reprieve. During the first full week of September, the fund industry was back in action with several launches, many of which were themed ETFs. Fidelity, which has long had a competitively priced range of simple stock index trackers, has now entered the thematic space with five ETFs, focusing primarily on well-traveled topics like clean energy.

Well known in the thematic space Legal & General Investment Management (LGIM) has launched four new funds with an environmental, social and governance (ESG) exclusionary focus, while Global X, VanEck and Franklin Templeton have also launched new funds .

I’ve spent enough time discussing the drawbacks of thematic ETFs in the past, but it’s still interesting to see more such products proliferate after such a fierce setback in the markets, even if the sudden flurry is partly due to companies that They wait until the end of August. to announce a release.

It’s also interesting to see a particular topic now in the spotlight. Fidelity has largely focused on a few core thematic areas covered by a number of other funds, while other new entrants are taking on what could be new niches. think the VanEck Genomics and Healthcare Innovators UCITS ETF (CURG) or the UCITS Global X Disruptive Materials ETF (DMAG).

But it seems hard to ignore the clamor to set up metaverse ETFs, as Franklin Templeton, LGIM and Fidelity have now done. These products will compete with ETC Group Global Metaverse UCITS ETF (METP), listed in London earlier this year. As is often the case, there’s quite a bit of difference when it comes to fees: ETC Group has a total expense ratio of 0.65 percent, Fidelity fund charges 0.5 percent, and LGIM and Franklin Templeton funds they charge 0.39 and 0.3 percent. cent, respectively.

In addition to questioning the extent to which the metaverse is a viable investment theme, investors will need to carefully assess how funds may differ, from their level of concentration to the extent to which they have strayed from the beaten path. It is notable, and perhaps not surprising, that many of the big tech stocks in the US and elsewhere, such as China, tend to feature in these funds, with varying degrees of prominence. As usual, prospective buyers might wonder how much overlap there is here with a US stock tracker, and even other topics.

If new funds are emerging as we enter the fall and the markets seem to have calmed down a bit, the problem of overlap with a conventional stock tracker is unlikely to present itself in the mutual fund space. The Sustainable Farmland Trust and the Independent Living Reit, which have declared their intention to conduct an initial public offering (IPO), will add to the growing range of alternative vehicles if they take off.

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